200 US regional banks at risk of failure: what can we expect?

The financial crisis in the United States has intensified following the recent failure of First Republic Bank, the largest since the 2008 financial crisis. With more than 200 midsize banks at risk of failure, the financial sector faces major challenges in the near future. What are the possible consequences of this situation and what measures are being taken to curb the problem?

Crash in the financial sector

El KBW Regional Banking Index it experienced a 5,5% plunge, reaching its lowest level since December 2020. In addition, the shares of the main regional banks in the United States have suffered significant falls. Investors are concerned about the impact of this crisis on other medium-sized lenders, as well as the country's large financial institutions.

Most affected banks

Among the banks most affected by this situation, we find PacWest Bancorp, whose shares collapsed 28%, Western Alliance Bank y keycorp, which fell by 15,7% and 9,5%, respectively. There were also falls in Zions y commercial, of more than 10%. Furthermore, the actions of JP Morgan they yielded 1,6%, Goldman 2,1%, Citi lost 2,6% and Wells Fargo 3,8%.

The acquisition of First Republic Bank by JPMorgan Chase & Co

Analysts have pointed out that the acquisition of the majority of First Republic's assets by JPMorgan Chase & Co it has extinguished the risks of contagion, at least for the moment. However, some investors are still concerned about the long-term impact of the deal on JPMorgan itself.

Impact on the real estate market

The financial crisis has also affected the real estate market. The actions of SL Green Realty Corp. y Boston Properties Inc., both real estate investment funds (REITs), fell 5,6% and 3,1%, respectively. Banks have warned of a slowdown in the office and retail real estate industry, due to uncertain demand for office space as a result of the increase in remote work since the COVID-19 pandemic.

What is the future of regional banks?

Although JPMorgan's acquisition of First Republic has temporarily dissipated contagion risks, the situation remains uncertain for regional banks. The Federal Deposit Insurance Corporation (FDIC) of the United States has reported that JPMorgan Chase Bank will assume all the deposits and almost all the assets of First Republic Bank, but it remains to be seen how the situation will develop in the future.